Buying voluntary offsets can and should be a regular part of the casual environmentalist’s lifestyle, just like recycling or carpooling. In this series, we’ll explore the voluntary carbon market, how to participate and why now is the time for action.

Deloitte has centered on two key areas where it can leverage its strengths as a business service provider to have a positive impact for the long term on the communities in which it operates: education and workforce development.

Monsanto presents a series on what it means to be “Climate Smart” in the world of agriculture. The series will cover the role of climate change in impacting food security, agriculture, weather patterns and society at large.

In this editorial series we’ll explore the role of business in supporting access to education and opportunities, and consider the best way to prepare a generation of leaders who understand the importance of sustainable development.

So, your company wants to reduce its landfill waste. Now what? As sustainability reaches top of mind for investors and customers, more companies are beginning to tackle waste in their supply chains in order to boost their green cred.

Are you responsible for implementing sustainability efforts, or tracking and reporting their results? Is the scope of your sustainability program expanding in all directions? This conference will offer insights that will help you improve your company’s performance internally and more effectively manage your sustainability data at both ends of the supply chain.

NAEM’s EHS Compliance Management Conference focuses on the core of EHS responsibilities and brings together a diverse group of cross-industry EHS professionals. Attend this conference for case studies and interactive dialogue on emerging trends and issues in EHS management including EHS auditing, data management, risk management, and staffing challenges. This is the conference you won’t want to miss.

What about credit rating agencies as a market actor to inspire climate resilience? Already, the 11 recommendations by the Task Force on Climate-Related Financial Disclosure – sorted into Governance, Strategy, Risk Management and Metrics/Targets – are sinking into the market. Many are turning to the credit rating agencies and asking them if they are even looking for information on climate risk and what they’re doing with any they find.

As I reported in late 2016 in a Triple Pundit article, “Laurels for Credit Rating Agencies, Levers of Change in the Adaptation Market,” the rating agencies have been exploring this subject for several years. Last November, Moody’s Investors Service explained how it incorporates climate change into its credit ratings for state and local bonds. It said that cities and states are at greater risk of default if they don’t deal with risks from rising seas or strong storms.

So, what specifically should we expect from the rating agencies? I recently participated in a Brookings Institute panel with Standard and Poor’s Managing Director Kurt Forsgren, who said that the S&P will increasingly consider climate change in its rating analysis.

Climate change risk and credit rating agency assessment

Today, in factoring climate change risk into municipal ratings, the rating services focus primarily on management effectiveness and planning that includes climate change risk. This is especially true in sectors with distinct climate risks that apply to their assets or revenue sources (such as water and electric utilities). They often perform a qualitative assessment of the climate change risk when detailed information is lacking.

In addition to risk, they assess municipal resilience that looks for:

Long-term management plans with adequately funded emergency funds

Proper insurance coverage for the climate related risks for the region

Deeper and more diverse economies

Evidence from Utility Districts

But, in reality, what are they seeking? For instance, S&P analysis for corporate ratings indicates that natural catastrophes lead to a one-notch downgrade 40 percent of the time. We know that the Municipal Utility District (MUD) ratings in and around Houston did not take a near-term hit in S&P’s assessments immediately following Hurricane Harvey, although the agency notes that it does “not preclude longer-term [rating] challenges for Hurricane []- affected [] MUDs.”

S & P’s specific comments for the MUDs are instructive for all build projects, planned or in place: “S&P Global Ratings believes the largest potential long-term rating impact to MUDs would be caused by a decline in the district’s assessed values, which support not only operational revenue but also the district’s ability to pay its debt burden, which is a primary driver for our MUD ratings.”

It added: “MUDs with comparatively higher tax rates may face some practical taxing limitations as affected areas adjust their tax rates to compensate for declines in assessed values.”

Although S&P believes the robust reserves of most MUDs will insulate them from rating downgrades, the impacts they expect from climate disruption are pretty clear here. Credit rating agencies see the physical impacts of climate change as material to the financial system. The larger the shock event, the longer and deeper the impact on credit quality, especially for those with poor credit quality before the event.

This is a major reminder about the importance of resilience. Communities struggling with poor credit quality will find it doubly difficult to borrow at favorable rates as the impact of climate change continues to grow – further exacerbating both market and social inequities.

Resilience Likely Helps

It seems we have the market signal we’ve been waiting for in the climate action community. This is a call to arms for all resilience brokers to build security, stability and sustainability in lower-resourced communities.

The key actions:

Get ahead of climate risk by making knowledge of it front and center for existing physical asset and future investment planning.

Collaborate among sustainability, risk, finance and insurance leaders internally and externally; climate change is no longer an issue to shift to the sustainability officer’s desk.

Through actions one and two, make sure that every investment is an investment for resilience, not just a few show ponies.

Joyce Coffee, LEED AP, founder and president of Climate Resilience Consulting, works with leaders to create strategies that protect and enhance markets and livelihoods through adaptation to climate change.
She has over 20 years of domestic and international experience in the corporate, government and non-profit sectors implementing resilience and sustainability strategies, management systems, performance measurement, partnerships, benchmarking and reporting.
Prior experience includes USAID's US-Asia Environmental Partnership (Asia and Washington), the World Bank (Vietnam), MWH (Chicago and Egypt), Farr Associates Architecture and Urban Design (Chicago) Chicago Climate Action Plan at the City of Chicago, Edelman, Notre Dame Global Adaptation Initiative, ND-GAIN